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540Phil.323

THIRDDIVISION
[G.R.NO.167812,December19,2006]
JESUSM.GOZUN,PETITIONER,VSJOSETEOFILOT.MERCADO
A.K.A.'DONPEPITOMERCADO,RESPONDENT
DECISION
CARPIOMORALES,J.:
OnchallengeviapetitionforreviewoncertiorariistheCourtofAppeals'Decision
of December 8, 2004 and Resolution of April 14, 2005 in CAG.R. CV No.
76309[1] reversing the trial court's decision[2] against Jose Teofilo T. Mercado
a.k.a.DonPepitoMercado(respondent)andaccordinglydismissingthecomplaint
ofJesusM.Gozun(petitioner).
In the local elections of 1995, respondent vied for the gubernatorial post in
Pampanga. Upon respondent's request, petitioner, owner of JMG Publishing
House, a printing shop located in San Fernando, Pampanga, submitted to
respondentdraftsamplesandpricequotationofcampaignmaterials.
By petitioner's claim, respondent's wife had told him that respondent already
approved his price quotation and that he could start printing the campaign
materials, hence, he did print campaign materials like posters bearing
respondent's photograph,[3] leaflets containing the slate of party candidates,[4]
sampleballots,[5]pollwatcheridentificationcards,[6]andstickers.
Giventheurgencyandlimitedtimetodothejoborder,petitioneravailedofthe
servicesandfacilitiesofMetroAngelesPrintingandofSt.JosephPrintingPress,
owned by his daughter Jennifer Gozun and mother Epifania Macalino Gozun,
respectively.[7]
Petitioner delivered the campaign materials to respondent's headquarters along
GapanOlongapoRoadinSanFernando,Pampanga.[8]
Meanwhile,onMarch31,1995,respondent'ssisterinlaw,LilianSoriano(Lilian)
obtainedfrompetitioner"cashadvance"ofP253,000allegedlyfortheallowances
of poll watchers who were attending a seminar and for other related expenses.
Lilianacknowledgedonpetitioner's1995diary[9]receiptoftheamount.[10]
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PetitionerlatersentrespondentaStatementofAccount[11]inthetotalamountof
P2,177,906 itemized as follows: P640,310 for JMG Publishing House P837,696
forMetroAngelesPrintingP446,900forSt.JosephPrintingPressandP253,000,
the"cashadvance"obtainedbyLilian.
On August 11, 1995, respondent's wife partially paid P1,000,000 to petitioner
whoissuedareceipt[12]therefor.
Despiterepeateddemandsandrespondent'spromisetopay,respondentfailedto
settlethebalanceofhisaccounttopetitioner.
Petitionerandrespondentbeingcompadres,theyhavingbeenprincipalsponsors
at the weddings of their respective daughters, waited for more than three (3)
yearsforrespondenttohonorhispromisebuttonoavail,compellingpetitioner
to endorse the matter to his counsel who sent respondent a demand letter.[13]
Respondent,however,failedtoheedthedemand.[14]
Petitioner thus filed with the Regional Trial Court of Angeles City on November
25,1998acomplaint[15]againstrespondenttocollecttheremainingamountof
P1,177,906plus"inflationaryadjustment"andattorney'sfees.
In his Answer with Compulsory Counterclaim,[16] respondent denied having
transacted with petitioner or entering into any contract for the printing of
campaignmaterials.Heallegedthatthevariouscampaignmaterialsdeliveredto
him were represented as donations from his family, friends and political
supporters. He added that all contracts involving his personal expenses were
coursedthroughandsignedbyhimtoensurecompliancewithpertinentelection
laws.
Onpetitioner'sclaimthatLilian,onhis(respondent's)behalf,hadobtainedfrom
him a cash advance of P253,000, respondent denied having given her authority
todosoandhavingreceivedthesame.
At the witness stand, respondent, reiterating his allegations in his Answer,
claimed that petitioner was his overall coordinator in charge of the conduct of
seminars for volunteers and the monitoring of other matters bearing on his
candidacy and that while his campaign manager, Juanito "Johnny" Cabalu
(Cabalu), who was authorized to approve details with regard to printing
materials, presented him some campaign materials, those were partly donated.
[17]

When confronted with the official receipt issued to his wife acknowledging her
payment to JMG Publishing House of the amount of P1,000,000, respondent
claimed that it was his first time to see the receipt, albeit he belatedly came to
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know from his wife and Cabalu that the P1,000,000 represented "compensation
[topetitioner]whohelpedalotinthecampaignasagestureofgoodwill."[18]
Acknowledging that petitioner is engaged in the printing business, respondent
explained that he sometimes discussed with petitioner strategies relating to his
candidacy, he (petitioner) having actively volunteered to help in his campaign
thathiswifewasnotauthorizedtoenterintoacontractwithpetitionerregarding
campaignmaterialsassheknewherlimitationsthathenolongerquestionedthe
P1,000,000 his wife gave petitioner as he thought that it was just proper to
compensatehimforajobwelldoneandthathecametoknowaboutpetitioner's
claim against him only after receiving a copy of the complaint, which surprised
himbecauseheknewfullywellthatthecampaignmaterialsweredonations.[19]
Uponquestioningbythetrialcourt,respondentcouldnot,however,confirmifit
was his understanding that the campaign materials delivered by petitioner were
donationsfromthirdparties.[20]
Finally,respondent,disclaimingknowledgeoftheComelecrulethatifacampaign
materialisdonated,itmustbesostatedonitsface,acknowledgedthatnothing
ofthatsortwaswrittenonallthematerialsmadebypetitioner.[21]
As adverted to earlier, the trial court rendered judgment in favor of petitioner,
thedispositiveportionofwhichreads:
WHEREFORE, the plaintiff having proven its (sic) cause of action by
preponderance of evidence, the Court hereby renders a decision in
favoroftheplaintifforderingthedefendantasfollows:
1. To pay the plaintiff the sum of P1,177,906.00 plus 12%
interest per annum from the filing of this complaint until
fullypaid
2. To pay the sum of P50,000.00 as attorney's fees and the
costsofsuit.
SOORDERED.[22]
Also as earlier adverted to, the Court of Appeals reversed the trial court's
decisionanddismissedthecomplaintforlackofcauseofaction.
In reversing the trial court's decision, the Court of Appeals held that other than
petitioner'stestimony,therewasnoevidencetosupporthisclaimthatLilianwas
authorized by respondent to borrow money on his behalf. It noted that the
acknowledgmentreceipt[23]signedbyLiliandidnotspecifyinwhatcapacityshe
receivedthemoney.Thus,applyingArticle1317[24]oftheCivilCode,itheldthat
petitioner'sclaimforP253,000isunenforceable.
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On the accounts claimed to be due JMG Publishing House P640,310, Metro

Angeles Printing P837,696, and St. Joseph Printing Press P446,900, the
appellatecourt,notingthatsincetheownersofthelasttwoprintingpresseswere
not impleaded as parties to the case and it was not shown that petitioner was
authorized to prosecute the same in their behalf, held that petitioner could not
collecttheamountsduethem.
Finally,theappellatecourt,notingthatrespondent'swifehadpaidP1,000,000to
petitioner, the latter's claim of P640,310 (after excluding the P253,000) had
alreadybeensettled.
Hence,thepresentpetition,faultingtheappellatecourttohaveerred:
1. . . . when it dismissed the complaint on the ground that
thereisnoevidence,otherthanpetitioner'sowntestimony,
to prove that Lilian R. Soriano was authorized by the
respondenttoreceivethecashadvancefromthepetitioner
intheamountofP253,000.00.
xxxx
2. . . . when it dismissed the complaint, with respect to the
amounts due to the Metro Angeles Press and St. Joseph
Printing Press on the ground that the complaint was not
broughtbytherealpartyininterest.
xxxx[25]
Bythecontractofagencyapersonbindshimselftorendersomeserviceortodo
something in representation or on behalf of another, with the consent or
authorityofthelatter.[26]Contractsenteredintointhenameofanotherperson
byonewhohasbeengivennoauthorityorlegalrepresentationorwhohasacted
beyond his powers are classified as unauthorized contracts and are declared
unenforceable,unlesstheyareratified.[27]
Generally, the agency may be oral, unless the law requires a specific form.[28]
However, a special power of attorney is necessary for an agent to, as in this
case,borrowmoney,unlessitbeurgentandindispensableforthepreservationof
thethingswhichareunderadministration.[29]Sincenothinginthiscaseinvolves
the preservation of things under administration, a determination of whether
Sorianohadthespecialauthoritytoborrowmoneyonbehalfofrespondentisin
order.
Lim Pin v. Liao Tian, et al.[30] held that the requirement of a special power of
attorneyreferstothenatureoftheauthorizationandnottoitsform.
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. . . The requirements are met if there is a clear mandate from the

principal specifically authorizing the performance of the act. As early
as1906,thisCourtinStrongv.GutierrezRepide(6Phil.680)stated
thatsuchamandatemaybeeitheroralorwritten.Theonethingvital
being that it shall be express. And more recently, We stated that, if
thespecialauthorityisnotwritten,thenitmustbedulyestablished
byevidence:
"...the Rules require, for attorneys to compromise the litigation
oftheirclients,aspecialauthority.Andwhilethesamedoesnot
statethatthespecialauthoritybeinwritingtheCourthasevery
reason to expect that, if not in writing, the same be duly
established by evidence other than the selfserving assertion of
counselhimselfthatsuchauthoritywasverballygivenhim."[31]
(Emphasisandunderscoringsupplied)
Petitioner submits that his following testimony suffices to establish that
respondenthadauthorizedLiliantoobtainaloanfromhim,viz:
Q:AnothercaptionappearingonExhibit"A"iscashadvance,itstates
given on 33195 received by Mrs. Lilian Soriano in behalf of Mrs.
Annie Mercado, amount P253,000.00, will you kindly tell the Court
andexplainwhatdoesthatcaptionmeans?
A: It is the amount representing the money borrowed from me by
the defendant when one morning they came very early and
talkedtomeandtoldmethattheywerenotabletogotothebank
to get money for the allowances of Poll Watchers who were having a
seminar at the headquarters plus other election related expenses
duringthatday,sir.
Q: Considering that this is a substantial amount which according to
you was taken by Lilian Soriano, did you happen to make her
acknowledgetheamountatthattime?
A:Yes,sir.[32](Emphasissupplied)
Petitioner'stestimonyfailedtocategoricallystate,however,whethertheloanwas
made on behalf of respondent or of his wife. While petitioner claims that Lilian
was authorized by respondent, the statement of account marked as Exhibit "A"
statesthattheamountwasreceivedbyLilian"inbehalfofMrs.AnnieMercado."
Invoking Article 1873[33] of the Civil Code, petitioner submits that respondent
informed him that he had authorized Lilian to obtain the loan, hence, following
Mackev.Camps[34]whichholdsthatonewhoclothesanotherwithapparent
authority as his agent, and holds him out to the public as such,
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respondentcannotbepermittedtodenytheauthority.
Petitioner'ssubmissiondoesnotpersuade.Astheappellatecourtobserved:
. . . Exhibit "B" [the receipt issued by petitioner] presented by
plaintiffappelleetosupporthisclaimunfortunatelyonlyindicatesthe
Two Hundred Fifty Three Thousand Pesos (P253,0000.00) was
received by one Lilian R. Soriano on 31 March 1995, but without
specifyingforwhatreasonthesaidamountwasdeliveredandinwhat
capacity did Lilian R. Soriano received [sic] the money. The note
reads:
"33195
261,120ADVANCEMONEYFORTRAINEE
RECEIVEDBY
RECEIVEDFROMJMGTHEAMOUNTOF253,000TWOHUNDREDFIFTY
THREETHOUSANDPESOS
(SIGNED)
LILIANR.SORIANO
33195"
Nowhere in the note can it be inferred that defendantappellant was
connected with the said transaction. Under Article 1317 of the New
Civil Code, a person cannot be bound by contracts he did not
authorizetobeenteredintohisbehalf.[35](Underscoringsupplied)
It bears noting that Lilian signed in the receipt in her name alone, without
indicating therein that she was acting for and in behalf of respondent. Shethus
bound herself in her personal capacity and not as an agent of respondent or
anyoneforthatmatter.
Itisageneralruleinthelawofagencythat,inordertobindthe
principal by a mortgage on real property executed by an agent, it
mustuponitsfacepurporttobemade,signedandsealedinthename
oftheprincipal,otherwise,itwillbindtheagentonly.Itisnotenough
merelythattheagentwasinfactauthorizedtomakethemortgage,if
hehasnotactedinthenameoftheprincipal.xxx[36](Emphasisand
underscoringsupplied)
On the amount due him and the other two printing presses, petitioner explains
thathewastheonewhopersonallyanddirectlycontractedwithrespondentand
he merely subcontracted the two printing establishments in order to deliver on
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timethecampaignmaterialsorderedbyrespondent.
Respondentcountersthattheclaimofsubcontractingisachangeinpetitioner's
theoryofthecasewhichisnotallowedonappeal.
InOcov.Limbaring,[37]thisCourtruled:
The parties to a contract are the real parties in interest in an action
uponit,asconsistentlyheldbytheCourt.Onlythecontractingparties
are bound by the stipulations in the contract they are the ones who
wouldbenefitfromandcouldviolateit.Thus,onewhoisnotaparty
toacontract,andforwhosebenefititwasnotexpresslymade,cannot
maintain an action on it. One cannot do so, even if the contract
performedbythecontractingpartieswouldincidentallyinuretoone's
benefit.[38](Underscoringsupplied)
In light thereof, petitioner is the real party in interest in this case. The trial
court'sfindingsonthematterwereaffirmedbytheappellatecourt.[39]Iterred,
however,innotdeclaringpetitionerasarealpartyininterestinsofarasrecovery
of the cost of campaign materials made by petitioner's mother and sister are
concerned, upon the wrong notion that they should have been, but were not,
impleadedasplaintiffs.
In sum, respondent has the obligation to pay the total cost of printing his
campaign materials delivered by petitioner in the total of P1,924,906, less the
partialpaymentofP1,000,000,orP924,906.
WHEREFORE,thepetitionisGRANTED.TheDecisiondatedDecember8,2004
and the Resolution dated April 14, 2005 of the Court of Appeals are hereby
REVERSEDandSETASIDE.
The April 10, 2002 Decision of the Regional Trial Court of Angeles City, Branch
57, is REINSTATED mutatis mutandis, in light of the foregoing discussions. The
trial court's decision is modifiED in that the amount payable by respondent to
petitionerisreducedtoP924,906.
SOORDERED.
Quisumbing,(Chairperson),Carpio,Tinga,andVelasco,Jr.,JJ.,concur.

[1] Penned by Associate Justice Andres B. Reyes, Jr., with the concurrence of

AssociateJusticesLucasP.BersaminandCeliaC.LibreaLeagogo.Rollo,pp.25
37,39.
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[2]PennedbyJudgeOmarT.Viola.Rollo,pp.6468.
[3]FolderofExhibits,p.13.
[4]Id.at14.
[5]Id.at15.
[6]Id.at16.
[7]TranscriptofStenographicNotes(TSN),November22,2000,pp.46.
[8]TSN,November24,1999,pp.89,1618.
[9]FolderofExhibits,p.9.
[10]TSN,November24,1999,pp.1113November22,2000,pp.67.
[11]FolderofExhibits,p.5.
[12]Id.at11.
[13]Id.at17.
[14]TSN,November,24,1999,pp.911,14,1923.
[15]Records,pp.216.
[16]Id.at4045.
[17]TSN,March21,2001,pp.57.
[18]Id.at810.
[19]TSN,July2,2001,pp.315.
[20]Id.at1516.
[21]Id.
[22]Rollo,p.68.
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[23]Vide:FolderofExhibits,Exhibit"B,"p.9.
[24]Noonemaycontractinthenameofanotherwithoutbeingauthorizedbythe

latter,orunlesshehasbylawarighttorepresenthim.
Acontactenteredintointhenameofanotherbyonewhohasnoauthority
or legal representation, or who has acted beyond his powers, shall be
unenforceable,unlessitisratified,expresslyorimpliedly,bythepersonon
whose behalf it has been executed, before it is revoked by the other
contractingparty.(Underscoringsupplied)
[25]Rollo,pp.1415.
[26]CIVILCODE,art.1868.
[27]Id.,art.1403.
[28]Id.,art.1869.InArt.874,thelawrequiresaspecificformincases"[w]hen

asaleofapieceoflandoranyinterestthereinisthroughanagent,theauthority
ofthelattershallbeinwritingotherwise,thesaleshallbevoid."
[29]Id.,art.1878,par.7.
[30]200Phil.685(1982).
[31]Id.at693.
[32]TSN,November24,1999,pp.1112.
[33]Ifapersonspeciallyinformsanotherorstatesbypublicadvertisementthat

hehasgivenapowerofattorneytoathirdperson,thelattertherebybecomesa
duly authorized agent, in the former case with respect to the person who
receivedthespecialinformation,andinthelattercasewithregardtoanyperson.
The power shall continue to be in full force until the notice is rescinded in the
samemannerinwhichitwasgiven.(Italicssupplied)
[34]7Phil.553(1907).
[35]Rollo,pp.3233.
[36]RuralBankofBombonv.CourtofAppeals,G.R.No.95703,August3,1992,
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212 SCRA 25, 30 citing Philippine Sugar Estates Development Co. v. Poizat, 48
Phil. 536, 538 (1925) Aguenza v. Metropolitan Bank and Trust Co., 337 Phil.
448,457(1997).
[37]G.R.No.161298,January31,2006,481SCRA348.
[38]Id.at358359.
[39]Withtheseevidenceandproofsgivenbytheplaintiff,theCourtisconvinced

that plaintiff was able to show that it [sic] has a legitimate claim against Mr.
Mercado.Thereisevidencethatheprinteddefendant'spoliticalmaterialsandthe
latterreceivedit.There is proof that Mercado partially paid the account but did
notsettletheentireamount.Plaintiffshowedalsothatademandletterwassent
todefendantandthesamewasreceivedbutinspitereceipt,Mr.Mercadodidnot
heedthedemand.Rollo,p.36.

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